Ex-Barclays Trader Says Bank Should Face Rate-Rigging Trial

LAGOS (Capital Markets in Africa) – An ex-Barclays Plc trader in court on allegations that he conspired to rig a key benchmark says his former employer should be the one on trial.

During the cross examination of Carlo Palombo, a prosecutor for the U.K. Serious Fraud Office said that Barclays didn’t want its traders making requests for submissions to Euribor that would benefit their own positions.

 “They wholly disapproved of this practice in 2019 in a courtroom,” Palombo said. “Had they not disapproved, they would have been standing where I’m standing right now, probably they should have been.”

Palombo, 40, and his two former colleagues, Colin Bermingham, 62, and Sisse Bohart, 41, are being tried for conspiracy to defraud related to their time at Barclays from January 2005 to December 2009. They all deny the allegations.

Euribor, the Euro interbank offered rate, is tied to trillions of dollars worth of loans and derivatives. The figure is an average of submissions from major banks that’s meant to reflect the cost of borrowing money every day. Investigations by the SFO showed Euribor and other indexes were manipulated to benefit traders betting on the value of the benchmarks.

Palombo said he only attempted to move the Euribor submission when he got requests from his bosses, mostly from Philippe Moryoussef, who was convicted last year for manipulating the benchmark.

Not Dodgy
According to Palombo, who joined Barclays as a trainee, it was so common and open to ask the bank’s cash desk to alter their submissions that he had no reason to think there was anything wrong with the practice.

“If they’d said, ‘Speak to me outside, make sure no one sees you,’ this would have been different,” Palombo said. “I’m not working for some tiny, little, dodgy guy in a basement. I’m a trainee at Barclays Capital, working for experienced traders.”

Looking back now, Palombo said he could see that it wasn’t appropriate to make the requests. Still, he said he didn’t believe it was wrong, illegal or market manipulation.

“If I had a thought that executing this instruction was a crime for which my life would be destroyed, why in the world would I have done this?” Palombo said. “I see in hindsight I should have been more careful and my life would have been easier.”

Found Out
In May 2009, Palombo sent a message to the cash desk asking for a high three-month Euribor submission, according to an email shown to the court by a prosecutor for the SFO, James Waddington. On this occasion, the Barclays employee on the cash desk told Palombo they couldn’t accommodate his request because compliance would have issues with it.

The prosecutor probed Palombo to answer why he didn’t challenge this response if he didn’t think he’d done anything wrong that would cause compliance to get involved.

“You knew you’d been rumbled, found out,” Waddington said. “That’s why you didn’t follow it up.”

Palombo said that was “completely false,” and maintained that many rules at the bank were changing following the financial crisis. It would have been normal that another team had a new guideline he didn’t know about.

The ability of the submissions to move the benchmark was insignificant anyway, according to Palombo, and the practice mostly stopped following the departure of Moryoussef. On earlier occasions when his requests had been accepted, there was little overall impact, Palombo said.

“I would like to say that my question to Ms. Bohart for a very high fixing is what caused the entire financial market to move,” Palombo said. “I would love to be that powerful, but unfortunately, I am not.”

Source: Bloomberg Business News